I dont think the dining is too small, its almost 3.7m long. An 8 seater table is like 2.1m.
Id leave dining as is and integrate the proposed alfresco space…

I suggest swapping the dining and alfresco location. This gives you one big living area which will feel much more generous and be easier to furnish.

Are you sure you dont want to extend the roof over the alfresco though?

Yeah, it'd probably be nice to do some flipping, bit just part of the house, of possible.
As you say, the garage is to the south, so it's best it stays…

Your orientation is actually all wrong. I would flip the layout.
To reduce size you could get rid of part of the living and reconfigure dining living (I would swap…